ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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INTERNAL CONTROL LAYERSThe internal control structure of the ECB is basedon an approach in which each organisationalunit (section, division, directorate or directorategeneral) is responsible for managing its own risksand controls, as well as the effectiveness andefficiency of its operations. Each organisationalunit implements operational control procedureswithin its area of responsibility in accordancewith the risk tolerance set ex ante by theExecutive Board. For example, a set of rulesand procedures – known as a Chinese wall – isin place to prevent inside information originatingin the areas responsible for monetary policyfrom reaching the areas responsible for themanagement of the ECB’s foreign reserves andown funds portfolio. In 2008 the ECB continuedto make progress in its approach to operationalrisk management. First, a central unit in theDirectorate General Human Resources, Budgetand Organisation coordinated a comprehensivetop-down exercise in which business areasidentified operational risks which, if they wereto materialise, could have significant negativebusiness, reputational or financial consequencesfor the ECB. On the basis of this exercise, actionplans were established for the treatment of suchrisks. Second, the ECB and the euro area NCBsdeveloped a framework for operational riskmanagement for Eurosystem tasks and processes,which will be implemented as of 2009.Independently from the internal control structureand risk monitoring of the ECB, audit missionsare performed by the Directorate Internal Auditunder the direct responsibility of the ExecutiveBoard. In accordance with the mandate definedin the ECB Audit Charter, 9 the ECB’s internalauditors provide independent and objectiveassurance and consulting services, bringing asystematic approach to evaluating and improvingthe effectiveness of risk management, control andgovernance processes. The Directorate InternalAudit abides by the International Standards forthe Professional Practice of Internal Auditing ofthe Institute of Internal Auditors.A Eurosystem/ESCB committee, the InternalAuditors Committee, which is composed ofthe heads of internal audit at the ECB and theNCBs, is responsible for coordinating theauditing of Eurosystem/ESCB joint projects andoperational systems.In order to enhance corporate governance,the Governing Council created an ECB AuditCommittee in April 2007, composed of three ofits members, with John Hurley (Governor of theCentral Bank and Financial Services Authorityof Ireland) as Chairman.CODES OF CONDUCTThere are three codes of conduct in place at theECB. The first is for the members of the GoverningCouncil and reflects their responsibility tosafeguard the integrity and reputation of theEurosystem and to maintain the effectiveness ofits operations. 10 It gives guidance to, and setsethical standards for, the members of theGoverning Council and their alternates whenexercising their functions as members of theGoverning Council. An adviser has also beenappointed by the Governing Council to provideguidance to its members on some aspects ofprofessional conduct. The second code is the Codeof Conduct of the ECB, which gives guidance to,and sets benchmarks for, the staff of the ECB andthe members of the Executive Board, all of whomare expected to maintain high standards ofprofessional ethics in the performance of theirduties. 11 In accordance with the Code of Conduct’srules against insider trading, the ECB’s staff andthe members of the Executive Board are prohibitedfrom taking advantage of inside information whenconducting private financial activities at their ownrisk and for their own account, or at the risk andfor the account of a third party. 12 The third code isa Supplementary Code of Ethical Criteria for the9 This charter is published on the ECB’s website to foster thetransparency of audit arrangements in place at the ECB.10 See the Code of Conduct for the members of the GoverningCouncil, OJ C 123, 24.5.2002, p. 9, its amendment, OJ C 10,16.1.2007, p. 6 and the ECB’s website.11 See the Code of Conduct of the European Central Bank in accordancewith Article 11.3 of the Rules of Procedure of the European CentralBank, OJ C 76, 8.3.2001, p. 12 and the ECB’s website.12 See Part 1.2 of the ECB Staff Rules containing the ruleson professional conduct and professional secrecy, OJ C 92,16.4.2004, p. 31 and the ECB’s website.ECBAnnual Report2008205
members of the Executive Board. 13 It complementsthe other two codes by further detailing the ethicalregime applicable to members of the ExecutiveBoard. An Ethics Adviser appointed by theExecutive Board ensures a consistent interpretationof these rules.ANTI-FRAUD MEASURESIn 1999 the European Parliament and the EUCouncil adopted a regulation 14 to step up thefight against fraud, corruption and any otherillegal activity detrimental to the Communities’financial interests. The regulation provides interalia for the internal investigation of suspectedfraud by the European Anti-Fraud Office(OLAF) within the Community institutions,bodies, offices and agencies.The OLAF Regulation foresees that each of thelatter adopt decisions in order for OLAF to beable to carry out its investigations within eachof them. In June 2004 the Governing Counciladopted a decision 15 concerning the terms andconditions for investigations by OLAF of theECB, which entered into force on 1 July 2004.PUBLIC ACCESS TO ECB DOCUMENTSThe ECB’s Decision on public access to ECBdocuments 16 adopted in March 2004 is in linewith the objectives and standards applied byother Community institutions and bodies withregard to public access to their documents. Itenhances transparency, while at the same timetaking into account the independence of theECB and of the NCBs and ensuring theconfidentiality of certain matters specific to theperformance of the ECB’s tasks. 17In 2008 the number of public access requestsremained limited.13 See the Supplementary Code of Ethical Criteria for the membersof the Executive Board, OJ C 230, 23.9.2006, p. 46 and theECB’s website.14 Regulation (EC) No 1073/1999 of the European Parliamentand of the Council of 25 May 1999 concerning investigationsconducted by the European Anti-Fraud Office (OLAF), OJ L 136,31.5.1999, p. 1.15 Decision ECB/2004/11 concerning the terms and conditionsfor European Anti-Fraud Office investigations of the EuropeanCentral Bank, in relation to the prevention of fraud, corruptionand any other illegal activities detrimental to the EuropeanCommunities’ financial interests and amending the Conditions ofEmployment for Staff of the European Central Bank, OJ L 230,30.6.2004, p. 56. This Decision was adopted in response to thejudgement of the European Court of Justice on 10 July 2003 inCase-11/00 Commission v European Central Bank, ECR I-7147.16 Decision ECB/2004/3 on public access to European CentralBank documents, OJ L 80, 18.3.2004, p. 42.17 In line with the ECB’s commitment to openness and transparency,an “Archives” section of the ECB’s website provides access tohistorical documentation.206 ECBAnnual Report2008
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EN2008EUROPEAN CENTRAL BANK ANNUAL
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© European Central Bank, 2009Addre
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CHAPTER 4FINANCIAL STABILITY AND IN
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7 Statistical accounting consequenc
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ABBREVIATIONSCOUNTRIESOTHERSBE Belg
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in the course of the year, in line
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currencies, T2S will be a major ste
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CHAPTER 1ECONOMICDEVELOPMENTS ANDMO
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Chart 1 ECB interest rates and mone
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Despite moderating, the annual grow
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substantial downward revisions in r
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in July, annual inflation in the OE
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As regards the Chinese economy, rea
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generally tighter financing conditi
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were recorded in December, but thes
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was driven mainly by developments i
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market tensions, particularly for l
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anking and financial system. At the
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cash flows to compensate for a redu
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quarter of 2008 and -0.1% in Decemb
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whereby investors’ uncertainty su
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September onwards, amid the great u
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Chart C Trading volumes for governm
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sponsored rescue plans were initiat
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The annual growth rate of consumer
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end of 2007. By December 2008 this
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calculated as the balance between g
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commodity prices (see Box 4). Conve
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Chart D Longer-term inflation expec
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apidly to 1.7% in December, mainly
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productivity slowed to 0.2% in the
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Table 3 Composition of real GDP gro
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Corporate investment, which had exp
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Box 5LABOUR MARKET DEVELOPMENTS IN
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Chart C Breakdown of employment gro
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Box 6DEVELOPMENTS IN THE ISSUANCE A
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Chart B Government bond yield sprea
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Box 7STATISTICAL ACCOUNTING CONSEQU
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warranted because of the need to co
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sharp depreciation of the euro was
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prices in the first eight months of
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focused more on the production rath
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segments and, in turn, affected eur
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and Bulgaria registered robust grow
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In the remaining non-euro area EU c
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Estonian kroon and the Lithuanian l
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Table 10 Official monetary policy s
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the Bank of England and Sveriges Ri
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CHAPTER 2CENTRAL BANKOPERATIONSAND
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Box 10MONETARY POLICY OPERATIONS DU
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Chart A Liquidity supply through op
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franc funding needs of banks with n
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MINIMUM RESERVE SYSTEMCredit instit
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with the ample allotments in the fi
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2008. By contrast, the average shar
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and SDR holdings increased by aroun
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and the ECB). As a result of carefu
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cross-CSD settlement. T2S will thus
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ELIGIBLE LINKS BETWEEN NATIONAL SEC
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Chart 48 Number of euro banknotes i
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3.3 BANKNOTE PRODUCTION AND ISSUANC
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4 STATISTICSThe ECB, assisted by th
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iii) payments statistics and iv) de
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5 ECONOMIC RESEARCHThe main functio
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were organised to disseminate resea
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the Financial Collateral Directive,
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on the Banque centrale du Luxembour
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standards by individual Eurosystem
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CHAPTER 3ENTRY OF SLOVAKIAINTO THE
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Table 13 Main economic indicators f
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As of January 2009 Slovakia is thus
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3 OPERATIONAL ASPECTS OF THE INTEGR
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4 THE CASH CHANGEOVER IN SLOVAKIATH
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Willem F. Duisenberg accepting the
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1 FINANCIAL STABILITYThe Eurosystem
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With regard to merger and acquisiti
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Page 159 and 160: 3 FINANCIAL INTEGRATIONThe Eurosyst
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Page 173 and 174: 1 EUROPEAN ISSUESIn 2008 the ECB co
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Page 177 and 178: 1.3 DEVELOPMENTS IN AND RELATIONS W
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Page 185 and 186: 1 ACCOUNTABILITY VIS-À-VIS THE GEN
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Page 190 and 191: CHAPTER 7EXTERNALCOMMUNICATION
Page 192 and 193: 2 COMMUNICATION ACTIVITIESThe ECB a
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Page 197 and 198: 1 DECISION-MAKING BODIES AND CORPOR
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Page 201 and 202: 1.3 THE EXECUTIVE BOARDThe Executiv
Page 203 and 204: 1.4 THE GENERAL COUNCILThe General
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Page 213 and 214: 4 ANNUAL ACCOUNTS OF THE ECB212 ECB
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Page 217 and 218: BALANCE SHEET AS AT 31 DECEMBER 200
Page 219 and 220: PROFIT AND LOSS ACCOUNT FOR THE YEA
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Page 225 and 226: NOTES ON THE BALANCE SHEET1 GOLD AN
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Page 229 and 230: (see “Banknotes in circulation”
Page 231 and 232: values at which the transactions we
Page 233 and 234: 15 CAPITAL AND RESERVESCAPITALPursu
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Page 239: individual circumstances. Basic sal
Page 243 and 244: 5 CONSOLIDATED BALANCE SHEET OF THE
Page 246 and 247: ANNEXES
Page 248 and 249: Number Title OJ referenceECB/2008/1
Page 250 and 251: Number Title OJ referenceECB/2009/1
Page 252 and 253: Number 2 Originator SubjectCON/2008
Page 254 and 255: Number 2 Originator SubjectCON/2008
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Number 2 Originator SubjectCON/2009
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Number 4 Originator Subject OJ refe
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oth the marginal lending facility a
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OVERVIEW OF THE ECB’S COMMUNICATI
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y the respective NCBs will also be
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OPEN MARKET OPERATIONS BY CURRENCYE
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USD operationsType oftransaction 1)
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DOCUMENTS PUBLISHED BY THEEUROPEAN
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95 “Financial stability challenge
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1012 “Petrodollars and imports of
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GLOSSARYThis glossary contains sele
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Economic analysis: one pillar of th
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Financial stability: condition in w
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MFIs (monetary financial institutio
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Reserve base: the sum of the eligib
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ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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